Buy State Bank of India; target of Rs 1350: Emkay Global Financial

Emkay Global Financial’ research report on State Bank of India

SBI reported PAT of Rs230bn/ROA ~1.2%, broadly in line with estimates, led by the treasury gains (+39% qoq) including the one-off SBI Funds stake sale gain of ~Rs72.8bn, partly offset by treasury MTM loss of Rs12.8bn and lower provisions (27% below estimate). PPoP was muted (~1.4% yoy/20% qoq) due to lower other income (47% below estimate) and higher opex (3% above estimate). Loan growth remained healthy at 18.2% yoy, with Management guidance of 14–15% growth in FY27. SBI continues to prioritize profitable growth, consciously forgoing low-yielding corporate and refinancing opportunities to protect margins. NIM expansion was driven by lower deposit costs, supported by FCNR(B)-led replacement of high-cost wholesale deposits and improved CASA balance, with Management expecting further upside from lagged EBLR/MCLR repricing while maintaining guidance above 3%. The management estimates net-of-tax ECL impact of ~Rs195bn, while ~Rs100bn of agricultural loans across three drought-affected states may qualify for restructuring.

Outlook

We expect ROA/ROE of ~1.1%/~16% over FY27-FY29E. We retain BUY with TP of Rs1,350, valuing it at 1.4x Sep-28E ABV and its subsidiaries/investments at Rs318/share.

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State Bank of India – 0411026 – emkay